Oil Stocks Outlook for the week – 14 to 18.12.2015
(Refining
cos seen up as GRMs going strong)
Low
crude oil prices will continue to weigh on the shares of producers like Oil
and
Natural Gas Corp Ltd and Oil India Ltd but state-owned oil marketing
companies
are expected to trade with positive bias as refining Margins have
moved
up in Oct-Dec.
Crude
oil prices are currently trading near seven-year lows. The Indian basket
of
crude oil hit a low of $36.65 a barrel on Thursday.
Broad
market trend will also be a key. Major indices are expected to open up
on
Monday after the industrial output numbers announced after market
hours
yesterday surprised on the upside. India's industrial output in October
came
at 9.8%, compared with a negative 2.7% a year ago and significantly
above
expectations of 8.0%.
However,
the US Federal Open Market Committee's decision on rate hike,
likely
Wednesday, will decide the trend in broad market for the rest of the
week.
Shares of oil refining and marketing companies--Indian Oil Corp Ltd,
Bharat
Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd may gain if the
broad
market trend remains positive.
Oil
marketing companies will be the biggest beneficiaries of the low oil prices
as
they are counter-cyclical to oil prices. However, sharp fall in oil prices may
lead
to inventory losses which would dent the companies' profits. Refining
margins
are seen robust in the current quarter as low prices and onset of winter
will
boost demand for products like diesel and fuel oil.
Reliance
Industries is best placed to take advantage of the robust margins. On
Wednesday,
we expect that the company's GRM in Oct-Dec Will be similar to
higher
than the historical high level of $10.6 in Jul-Sep.